PS v Secretary of State for Work and Pensions (SPC)

For state pension credit, income paid in arrears is attributed from its receipt, rather than retrospectively over the period for which it accrued. Recovery under Social Security Administration Act 1992, section 71 therefore cannot be founded on pension income before the claimant actually received it.

A tribunal considering recovery must identify the statutory basis for any duty to disclose and give the claimant a fair opportunity to answer the precise case for recovery. It may not substitute failure to disclose for an alleged misrepresentation without procedural fairness.

Section 74 applies where prescribed income was paid late, not merely because an income payment is made in arrears on its due date.

The claimant appealed against First-tier Tribunal decisions which upheld recovery of an overpayment of state pension credit. The Secretary of State had treated an army pension as income from March 2006. The tribunal found that the first payment was not received until 2008, when arrears were paid, but nevertheless upheld recovery under section 71 of the Social Security Administration Act 1992.

The tribunal changed the asserted basis of recovery from misrepresentation to failure to disclose. It made incomplete findings about the arrears payment and did not identify the legal source of any disclosure duty. The central issues were the attribution of late pension income and the conditions for recovery under sections 71 and 74.

1. Appeals allowed. The First-tier Tribunal made material errors of law. Its decisions were set aside and the cases were remitted for a complete rehearing before a differently constituted tribunal.

2. The state pension credit scheme operates by attributing actual income payments to an appropriate period. Where the first army-pension payment was received in 2008, the claimant could not be treated as having pension income between March 2006 and that receipt. Recovery under section 71 of the Social Security Administration Act 1992 could not therefore be based on that earlier period. The tribunal also failed to find the date to which the arrears payment related before regular monthly payments began.

3. Section 74(1) applies to prescribed income paid after the date on which it should have been paid. It does not apply merely because an ongoing payment is made in arrears on its due date. Its operation is independent of fault; recovery is, however, subject to the Secretary of State’s discretion.

4. There was a breach of natural justice when the tribunal changed the case from misrepresentation to failure to disclose without ensuring that the claimant could address that basis of liability. A failure to disclose under section 71 requires a legal duty to disclose. The tribunal’s asserted general obligation on every claimant to report any additional income was wider than regulation 32(1B) of the Social Security (Claims and Payments) Regulations 1987. The claim-form declaration did not itself establish the specific duty contemplated by regulation 32(1A).

5. On rehearing, the First-tier Tribunal must determine entitlement, overpayment and recoverability afresh on full evidence. It must give both parties a fair opportunity to address any basis of recovery not advanced by the Secretary of State, and may not take account of later circumstances except as evidence from which to infer the circumstances at the time of the decisions.

• Upper Tribunal (Administrative Appeals Chamber): Appeals allowed. The First-tier Tribunal decisions of 2 July 2014, references SC010/13/01498 and SC010/13/01499, were set aside and remitted for rehearing.
• First-tier Tribunal (Social Entitlement Chamber): Upheld recovery of state pension credit under section 71 of the Social Security Administration Act 1992, on failure to disclose rather than the Secretary of State’s original allegation of misrepresentation.